Consolidating debt is a clever tactic for reducing monthly payments on multiple debts. In turn, many students are considering this option as an effective way to pay off their mounting loans and interest rates.

To successfully consolidate debt for a lower interest rate, your portfolio of credit should be diverse. You need something else with which to consolidate, whether it be credit card debt, personal loans or medical debts. For some debt consolidation seekers, the option to roll debt into their mortgage arises.

When utilizing your mortgage or home equity loan, you’re borrowing money against your home, which means your house will become the collateral should anything go wrong. If you’ve purchased a home within the last 10 years, it’s likely your mortgage rate is incredibly low, so the idea of bundling your student loan into a home equity loan could be appealing.

The loan you’ve incurred may be higher or lower than the numbers previously listed, but understanding the difference in interest between what annual percentage rate (APR) you can have for a home equity loan and what APR your student loans currently have will be the first step in determining whether consolidating your debt is the right move for you.

Review the term of your mortgage If you end up with a lower interest rate than the one you’re currently paying, will the lifetime of your loan extend? If you pay less money for a longer time period, you may end up paying more in interest than if you pay more money for a shorter time period. Consider these factors:

Is it worth the risk? You’ve done the math, and the rates are lower with a home equity loan. You may find a lower rate, but if you default on payments, it’s not just your credit score at risk; it’s also your home.

Do you know all the options for paying off student loan debt? Make sure you’ve explored all options for student loan debt before factoring in a home equity loan. Consumer Finance can walk you through options you may not know about for repayment or forgiveness of both federal and private loans. If you remove your federal loans by opening a home equity loan, you’ll be forfeiting the opportunity to qualify for loan forgiveness or other repayment plans.

Ask a tax adviser. What impact will a home equity loan have on your taxes? The tax benefits for home equity loans aren’t equal to the tax deductions of a student loan. Understanding which will benefit you more (keeping student loans or adjusting your mortgage) will paint the picture of which option fits your long-term financial plan.

Who should consider rolling their student debt into home equity loan? If you have a nest egg, an emergency savings account, a reliable job, no missed payments and a strong understanding of the magnitude of this situation, you’re an example of someone who could make this decision work. If you play your cards right, opening a home equity loan to include your student loan debt could mean you’ll pay your student loans off effectively, with a lower interest rate.

Again, understanding the importance of this situation is vital. If you don’t make your payments on time, your home and credit score are on the line. Dedicate the appropriate amount of research, and you’ll soon be on your way to discovering if this option is for you.

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